Krista Quarles or Julie Brooks

This administrative regulation establishes the registration, processing, and manufacturing procedures for hemp-derived cannabinoid products, and the labeling and packaging requirements for products containing hemp-derived cannabinoids.

Many hemp-derived cannabinoid products sold in Kentucky remain unregulated. This administrative regulation is necessary to ensure that all hemp-derived cannabinoid products produced, manufactured and sold in the state are safe for human consumption.

KRS 217.125(1) authorizes the secretary of the Cabinet for Health and Family Services to promulgate administrative regulations for the efficient administration and enforcement of the Kentucky Food, Drug and Cosmetic Act, KRS 217.005 through 217.215. KRS 217.125(2) requires the secretary to provide by administrative regulation a schedule of fees for permits to operate and for inspection activities carried out by the cabinet pursuant to KRS 217.025 through 217.390. KRS 217.135 authorizes the secretary to establish food standards by administrative regulation including a reasonable definition, standard of identity, and designation of optional ingredients that shall be named on the label. KRS 217.155 allows the cabinet or its duly authorized agent free access at reasonable times for the purpose of inspection any factory, warehouse, or establishment where foods, drugs, devices, or cosmetics are manufactured or held for sale. This administrative regulation establishes the product registration, the processing and manufacturing procedures for hemp-derived cannabinoid products, including the permit fee, and the labeling and packaging requirements for products containing hemp-derived cannabinoids. Establishments permitted with the department prior to the effective date of this administrative regulation shall be exempted from the permit fee requirement until the annual renewal date.

This administrative regulation ensures all hemp-derived cannabinoid products manufactured, processed, distributed, or sold are safe for human consumption, and are labeled in a manner that allows the end user to understand the effects of the products.

This is a new administrative regulation.

This is a new administrative regulation.

This is a new administrative regulation.

This is a new administrative regulation.

There are currently thirty-eight (38) manufacturers of cannabidiol (CBD) products registered with the department.

The requirements of this administrative regulation are not new requirements for processors and manufacturers. Processors and manufacturers will need to make sure their products comply with the requirements of this administrative regulation.

The permit will cost processors $3,000 plus $200 per registered product or product class. The permit for manufacturers is $1,000 plus $200 per registered product or product class. The permit for warehouses is $1,000. The permit for cosmetic manufacturers is $200. Out-of-state processors and manufacturer will pay $200 per to register products or product class shipped into the commonwealth.

Producers and manufacturers will be able to offer products that are safe for human consumption.

The current budget for the food manufacturing permitting and inspection program is $1,080,900. The increase in required permitting and inspection processes to implement this emergency administrative regulation will cost the department an additional $1,551,397 in the first year.

The department will continue to need an additional $1,551,397, at a minimum, in subsequent years. An increase in permitted facilities will result in increased costs.

State general fund dollars and revenue received from permitting and product registration are the sources of funding for this administrative regulation.

Processors and manufacturers currently pay between a $125 and $1,000 fee depending on the size of the facility and level of risk of the products produced. The fees established in this administrative regulation are necessary to offset the cost associated with implementing this administrative regulation.

This administrative regulation does establish permitting and project registration fees. The proposed fee structure is an increase from the current assessed fee. The current fee structure references the fee structure for food manufacturing and processors and manufacturers may pay between a $125 and $1,000 fee depending on the size of the facility. It is not appropriate to regulate cannabinoid products as food products. Products that contain cannabinoids should be regulated under their own classification. This includes the permit and product registration fee structure.

Tiering is applied. The fee for all processors and manufacturers currently permitted by the department on the effective date of this administrative regulation will be waived until the date of the next annual renewal. All new applications for a permit will be assessed the fee upon initial filing.

KRS 217.125, 217.127, 217.135, and 217.155.

The Department for Public Health, Division of Public Health Protection and Safety is the promulgating agency.

Expenditures for the department to implement this administrative regulation will be approximately $1,551,397 per year.

Revenues for the permitting of processors and manufacturers in this administrative regulation can range between $38,000 to $114,000. The revenue for product registration cannot be determined at this time.

This administrative regulation does not result in cost savings.

Expenditures for the Department for Public Health may be impacted by changes in salary, fringe benefits, and travel cost for state and local health department employees. These changes cannot be determined at this time. Expenditures for regulated entities will not change without an amendment to this administrative regulation.

Local law enforcement entities may be affected by this administrative regulation.

The department is not able to calculate the expenditures for affected local entities at this time.

This administrative regulation will not generate revenue for affected local entities.

This administrative regulation does not result in cost savings.

The department is not able to determine changes in expenditures, revenues or cost savings for affected local entities.

This administrative regulation will impact all cannabinoid processors, manufacturers, storage warehouses, and distributors. Currently there are thirty-eight (38) entities permitted by the department.

Expenditures will range from $200 for cosmetic manufacturers to $3,000 for processors and manufacturers who produce adult-use cannabinoid products.

Revenues for the affected entities will be dependent on product sales.

This administrative regulation does not result in cost savings.

Expenditures will not change in subsequent years without an amendment to this administrative regulation. Revenues can change depending on product sales.

This administrative regulation may generate between $38,000 and $114,000 in revenue. Additional revenue will be generated by the product registration fee, but that total cannot be determined at this time. The cost to the department to administer this administrative regulation is $1,551,397.

The total range for the potential revenue was calculated by multiplying the current number of permitted facilities times the lowest and highest permit fee amounts, which is 38X1,000 and 38X3,000 respectively. The total expenditure was calculated based on the need for thirteen (13) additional environmental management staff to oversee the permitting and inspection activities. The thirteen (13) additional staff include a branch manager, administrative support staff, two (2) supervisors, two (2) processing/manufacturing inspectors, five (5) retail inspectors, and two (2) enforcement staff. The breakdown of expenditures is as follows: -- Administrative Clerk: Program Coordinator (Grade 14); Annual Salary + 5% Probationary increase: $59,213.70; Fringe Benefits - FICA - Retirement - Hlth/Life Ins: $53,711.55; Total Annual Salary and Fringe Benefits: $112,925.25 x 1 Employee = Total Amount: $112,926.25 ---- Retail Inspectors: Program Evaluator (Grade 14); Annual Salary + 5% Probationary increase: $59,213.70; Fringe Benefits - FICA - Retirement - Hlth/Life Ins: $53,711.55; Total Annual Salary and Fringe Benefits: $112,925.25 x 5 Employees = Total Amount: $564,626.27 ---- Processor/manufacturing Inspectors, Enforcement staff, and Supervisors: Program Administrator (Grade 15); Annual Salary + 5% Probationary increase: $65,135.20; Fringe Benefits - FICA - Retirement - Hlth/Life Ins: $58,082.80; Total Annual Salary and Fringe Benefits: $123,218.00 x 6 Employees = Total Amount: $739,307.99 ---- Manager: Branch Manager (Grade 16); Annual Salary + 5% Probationary increase: $71,646.12; Fringe Benefits - FICA - Retirement - Hlth/Life Ins: $62,889.17; Total Annual Salary and Fringe Benefits: $134,535.29 x 1 Employee = Total Amount: $134,535.29 ---- TOTAL AMOUNT = $1,551,396.79

The expenditures for the department will exceed $1,000,000, resulting in an overall negative or adverse major economic impact. The overall economic impact for the regulated entities cannot be determined. While these entities will have expenditures associated with the permit and product registration, these will be offset by the revenue received in product sells.

Legislation has delegated new authority to the Kentucky Department for Public Health (KDPH) to regulate recreational adult-use products, such as delta-8 THC, for the safety of Kentuckians. These products, which may only be sold to adults aged 21 years or older, are increasingly complex, diverse, and evolving. An estimated 1,000-1,500 retailers and 40 manufacturers of recreational adult-use drugs are believed to be operating in Kentucky. Manufacturers of hemp THC products use complex chemistry conversion methods to process distillates, which increases the technical training required for inspection. Due to the intricacies involved, the successful oversight and regulation of these products in Kentucky will require additional staffing and the use of a hybrid approach that blends the traditional roles of the Department of Alcoholic Beverage Control, such as the enforcement of laws and age verification, with the expertise of the Food and Drug Administration (FDA). In order to adequately oversee the manufacture and retail sale of these products, the department would propose establishing a new branch with specialized staff. An estimated additional thirteen (13) staff will be needed to carry out the following activities: Regulatory Oversight: Establish and enforce standards for product manufacturing, packaging, and labeling for human consumption; Establish and enforce distribution controls to consumers to prohibit and prevent sales of adult-use products to individuals under 21 years of age; Prohibit the manufacture and sale of unallowable products; Protect consumers from harmful exposure to chemicals, contaminants, and adulterants that would have an adverse impact on human health; Evaluate the use of chemicals when added to products, such as food ingredients and substances that come into contact with food through food processing, manufacturing, packaging, storage, or other handling to ensure these uses are safe; Monitor products for contaminants and take action when the level of a contaminant causes a product to be unsafe. Licensing and Inspections: Administer licensure and registration for processors, manufacturers, distributors, and retailers and conduct regular inspections to ensure compliance with regulatory requirements. Surveillance and Monitoring: Collect and analyze data on adverse events and product quality to guide decision-making and interventions. Collaboration and Partnerships: Collaborate with federal/state agencies, professional organizations, academic institutions, and industry stakeholders to exchange information, share best practices, and coordinate efforts to address common challenges.